China Must Manage Debt Bubble to Avoid New Global Financial Crisis

Among the many uncertainties that have spooked stock markets in early 2016 – from power rivalries in the Middle East to Europe’s unabated refugee crisis – the most unsettling has been the slowdown in emerging markets, as signaled by a collapsing oil price.

Until 2015, emerging markets were the engines of global growth. Now Brazil and Russia are in recession, while China and other Asian economies are losing momentum. Among a myriad of factors that are weighing emerging markets down, the growing burden of private debt has received most attention recently. And rightly so.

Debt of households and non-financial companies in emerging markets has increased strongly since 2007, from around 80 percent to 120 percent of GDP.

Concurrently, at least since 2010, much of the industrialized world has been deleveraging.

This is why some observers are talking about private-sector debt in emerging markets being the third stage of the global debt crisis – from mortgages in the US to sovereign debt in the eurozone and now to private-sector debt in emerging countries.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam